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Retailers Celebrate Scuttled Pennsylvania Pipeline Plan

State rejects plan to bring in Midwest fuel after backlash from Sheetz, GetGo

HARRISBURG, Pa. -- A plan that would partially reverse the flow of a critical pipeline in Pennsylvania, which had been criticized by Sheetz and Giant Eagle’s GetGo chain, has been scuttled after a state board rejected it.

In 2016, Houston-based pipeline operator Buckeye Partners LP asked Pennsylvania’s Public Utility Commission (PUC) to approve plans to reverse the flow of part of the 350-mile-long Laurel pipeline. Philadelphia refiners have been using the pipeline, which runs from Philadelphia in the east to Pittsburgh in the west, to carry fuel and heating oil across the state for several decades.

Buckeye, which owns the pipeline, had argued in its petition that the Laurel pipeline is operating below capacity because the market is moving toward cheaper Midwestern refiners for supply, and that the reversal would help lower gasoline prices in the state. The plan would stop the pipeline’s current east-to-west flow from Philadelphia to end at its El Dorado terminal in Altoona, Pa., in the center of the state. It would then reverse the flow on the western portion of the pipeline to move west to east, giving Midwest refiners such as Marathon Petroleum Corp. and Husky Energy a route to the Pittsburgh market.

However, fuel retailers including Altoona-based Sheetz and Pittsburgh-based Giant Eagle, as well as some East Coast refiners, had protested the plan, arguing the pipeline reversal could reduce supply from Philadelphia and increase wholesale prices in the western part of the state. In December 2017, Mike Lorenz, executive vice president of petroleum supply for Sheetz, had testified before the PUC against the petition, according to The Inquirer. He argued that Midwestern refiners have sufficient access to the Pittsburgh market, and that cutting off fuel supplies from the east would make gasoline prices “skyrocket” in Sheetz’s western Pennsylvania markets, and reduce competition among refiners. 

On July 12, the five-member PUC unanimously rejected Buckeye's petition, concluding that the reversal would potentially harm consumers and Pennsylvania’s two refineries on the East Coast, Reuters reported

Fight Over Flow

Buckeye had argued that because demand was greater among Midwest refiners compared to East Coast operators, reversing the pipeline’s flow made commercial sense. But the PUC decided that the pipeline owner did not prove its case.

“The company did not provide any evidence that it couldn’t achieve the same goals by increasing rates,” said Gladys Brown, chairwoman of the PUC.

Deny Buckeye, a coalition that includes fuel retailers Sheetz and GetGo, as well as Gulf Oil's Lucknow-Highspire terminal business, wholesaler Guttman Energy and East Coast refiners Monroe Energy and Philadelphia Energy Solutions, celebrated the decision.

“Had the reversal been approved, the only winners would have been Buckeye Partners and out-of-state, midwestern refineries,” the group said in a statement. “Midwest refineries already have access to Pennsylvania markets, but they didn’t want competition. Pennsylvania refineries have supplied fuel to our commonwealth through the Laurel Pipeline for over a half-century. It is stunning to think a company tried to block our own refineries from serving Pennsylvania. In doing so, fuel prices would have skyrocketed, and thousands of Pennsylvania jobs would have been in jeopardy.”

While this decision closes the book on Buckeye’s petition to the state, the pipeline owner also has a similar petition in front of the Federal Energy Regulatory Commission (FERC). This petition permits the pipeline’s western section to flow in both directions but at different times, so that East Coast refiners would have some access to Pittsburgh, Reuters reported.

In a statement, Buckeye said it was not giving up on its efforts to introduce bidirectional flow on the Laurel pipeline.
 
“While we are waiting to review the commission’s formal order, we respectfully disagree with the decision regarding our market-driven proposal aimed at providing Pennsylvania consumers with expanded access to more affordable fuels, but we will abide by the decision and continue to move forward with our current plans to provide bidirectional service on Laurel pipeline,” the company said. “Bidirectional service will enhance competition and provide shippers and suppliers with more options while still increasing access to lower-cost North American-produced fuels for Pennsylvania consumers.”

Photo courtesy of Beyond Coal & Gas. 

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